11. Acquisition

On July 2, 2019, the Company completed the acquisition of AGI, a privately-held professional transportation engineering services firm headquartered in Tampa, Florida, with offices in Orlando (FL), Virginia Beach (VA) and Chadds Ford (PA). AGI assists municipalities in maximizing the effectiveness of their existing transportation networks through a collection of traffic management services to cost effectively improve the performance of roadway systems and address increased traffic demands, traffic congestion and delay. With a foundation of arterial timing plan development, AGI has expanded its services into active arterial monitoring and management with multiple public sector clients. AGI is expected to expand the Company's geographic footprint for ITS services in Florida, as well as in the Midwest and Mid-Atlantic region. AGI's typical contracts are for traffic operations professional engineering services focused on transportation systems management and operations.

Pursuant to a Stock Purchase Agreement dated June 10, 2019 among the Company, AGI and the stockholders of AGI (the "Selling Shareholders"), the Company acquired all of the outstanding capital stock of AGI from the Selling Shareholders for an aggregate purchase price of $10.8 million, after working capital adjustments, payable in cash and stock, of which 114,943 shares are being held in escrow for 18 months to secure performance of indemnification and other post-closing obligations of the Selling Shareholders.

Since the date of acquisition AGI operated as a wholly-owned subsidiary of the Company, as part of the Transportation Systems segment, and contributed approximately $6.4 million of service revenue and approximately $1.7 million of net income.

The acquisition of AGI has been accounted for as a business combination. We estimated the fair values of net assets acquired, and the excess of the consideration transferred over the aggregate of such fair values was recorded as goodwill.

The following tables summarize the purchase price allocation (in thousands) as of July 2, 2019:


Cash	$	664
Trade accounts receivable		905
Unbilled accounts receivable		347
Right-of-use assets		863
Property and equipment		357
Intangible assets		3,710
Goodwill		5,440
Other assets		161
Total assets acquired		12,447
Accounts payable		(378)
Accrued payroll and related expenses		(426)
Lease liabilities		(863)
Total liabilities assumed		(1,667)
Total purchase price	$	10,780

The fair values of the remaining AGI assets and liabilities noted above approximate their carrying values at July 2, 2019. There was no difference between the fair value of trade accounts receivables and the gross contractual value of those receivables. There are no contractual cash flows related to these receivables that are not expected to be collected. The Company believes the goodwill related to the acquisition was a result of the ability of the Company to leverage its technology in the broader market, as well as offering cross-selling market exposure opportunities. Goodwill from the acquisition of AGI is included within the Company's Transportation Systems reporting unit. The goodwill is fully deductible for tax purposes. The significant intangible assets identified in the purchase price allocation include customer relationships and non-compete agreements, which are amortized over their respective useful lives on a straight line basis which approximates the underlying cash flows. To value the customer relationships, the Company utilized the income approach, specifically a discounted cash-flow method known as the excess earnings method. The Company utilized the with and without method to derive the fair value of the non-compete agreement. The fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. Varying discount rates were applied to the projected net cash flows and EBITDA as applicable to valuation methodology. We believe the assumptions are representative of those a market participant would use in estimating fair value.

The following table presents the fair values and useful lives of the identifiable intangible assets acquired:


			Weighted Average
	Amount		Useful Life
	(in thousands)		(in years)
Customer relationships	$	3,500	6
Non-compete agreement		210	3
Total intangible assets assumed	$	3,710

Acquisition-Related Costs

In connection with the acquisition, the Company agreed to grant $1.7 million in retention bonuses to the Selling Shareholders and other employees payable in the form of restricted stock units at $5.22 per share, and $570,000 in retention bonuses payable in cash, each vesting and payable over three years following the closing, provided such employees remain in our service on the first, second and third anniversary of the closing of the acquisition. For the fiscal year ended March 31, 2020, the Company recorded approximately $1.0 million, as stock based compensation and salaries expense to selling, general and administrative expense in the consolidated statements of operations, related to these bonuses. Additionally, approximately $689,000, in acquisition related professional fees was recorded to selling, general and administrative expense for the year ended March 31, 2020.

Pro Forma Financial Information (Unaudited)

The following pro forma information presents the consolidated results of operations of the Company and AGI for the fiscal years ended March 31, 2020 and 2019, as if the acquisition of AGI had been completed on April 1, 2018. These pro forma consolidated financial results have been prepared for comparative purposes only and include certain adjustments that reflect pro forma results of operations, such as increased amortization for the fair value of acquired intangible assets and increased salaries expense related to the retention bonuses. The pro forma results do not reflect any operating efficiencies or potential cost savings that may result from the consolidation of the operations of the Company and AGI. Accordingly, these pro forma results are presented for informational purposes only and are not necessarily indicative of the results of operations that actually would have been achieved had the acquisition occurred as of April 1, 2018, nor are they intended to represent or be indicative of future results of operations:


	Year Ended March 31,
	2020		2019
Proforma revenue	$	116,333	$	107,049
Proforma net loss		(5,775)		(7,108)

Pro forma loss per common stock
Basic		(0.14)		(0.21)
Diluted		(0.14)		(0.21)